Tenant brokers were scratching their heads over conflicting third quarter leasing figures in Pasadena. Vacancies jumped two full points higher than the same period last year, and net absorption plunged into the red by more than 56,000 negative square feet even as Class A rental rates spiked 18 cents to $3.72 per square foot.
But local brokers said the $23 billion sale of Equity Office Properties’ portfolio in February to the Blackstone Group resulted in sharply higher rents for local properties owned by the private equity firm.
“It seems counterintuitive until you realize that the major blocks of empty space are in buildings owned by Blackstone Group, which has bumped rents 40 percent since they took over the portfolio in February,” said one broker. “Rental rates are well past $4.50 per foot in the Pasadena Towers, despite three vacant floors.”
Blackstone sold its position in the Pasadena Towers, 800 E. Colorado Blvd., in the third quarter to its joint venture partner, the Macquarie Office Trust, an affiliate of an Australian bank. But brokers don’t expect Macquarie to reverse Blackstone’s aggressive increase in leasing rates, given the trust’s long-term investment horizon, a lack of new product in Pasadena and a tenant base driven by blue-chippers, such as the Jet Propulsion Laboratory, looking to expand.
Brokers also pointed to brisk sales throughout the Tri-Cities as proof that rental dips haven’t impacted investor confidence, including strong interest in previously weak Glendale. Legacy Partners bought the high rise at 101 N. Brand Blvd. for $149 million in a sale that closed in September.
“We’ve sold 101 N. Brand, for the third time in five years, the last time having 31 offers,” noted Patrick Church, senior vice president with CB Richard Ellis Group Inc. “The Tri-Cities have been active. The challenge has been getting sellers to sell based on the fact that we’ve seen a 10-20 percent (rental rate increase) over the last two months.”
Meanwhile, the Burbank vacancy rate fell to 3.4 percent, the lowest countywide.
MAIN EVENTS
– REIT, Wells Real Estate Investment Trust II Inc., based in Norcross, Ga., purchased the Pasadena Corporate Park, 3465 E. Foothill Boulevard, from seller IndyMac Bank for $116 million in a leaseback deal. IndyMac will continue to occupy 71 percent of the property, which is comprised of three office buildings and one retail building, for another 10 years. The 265,000-square-foot site is fully leased and becomes Wells REIT II’s second L.A. metro purchase, along with the Manhattan Towers in Manhattan Beach.
– Legacy Partners paid $149 million to Principal Financial Group for Glendale City Center, at 101 N Brand Blvd. The building is only 60 percent leased, but brokers still called it a “full-price acquisition for an irreplaceable asset,” given the area’s supply constraint and the nearby “Americana at Brand” mixed-use project which is nearing completion.
– LaeRoc Partners Inc. sold the 87,000-square-foot Burbank Airport Centre, at 2550 N. Hollywood Way. Private equity investors Unilev Capital Corp., which has large office holdings in Houston, paid $28.25 million for the building.
– Industrial real estate buyers Rexford Industrial LLC paid $9.3 million for a 42,500 square foot office/warehouse building at 901 W. Alameda in Burbank. Rexford plans to upgrade the building and put it back on the market as creative office and post-production space.
– Glendale Financial Square, at 225 W. Broadway across from the Glendale Galleria, sold to Beverly Hills-based Cambra Real Estate, for nearly $32.7 million. The seller, Delma Properties Inc., received more than a dozen offers.
David Geffner
